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While studying computer science at UC Berkeley, Schafer became interested in writing, and took inspiration from Kurt Vonnegut, who while a publicist at General Electric wrote short stories in the evenings. Schafer opted for a similar course, interning to help develop databases for small companies while trying to position himself for an opening in a larger corporation such as Atari and Hewlett-Packard, but he was rejected by these.[4] He saw an offering at Lucasfilm Games, looking for programmers who could also write game dialog, which piqued his interest.[4] During his application process for the job, he had a somewhat disastrous phone interview with David Fox in which he mentioned being a fan of Ballblaster. Fox informed him that the Lucasfilm Games title was Ballblazer, and that only the pirated version was known as Ballblaster, but despite the misstep, Fox asked Schafer to submit his resume for further consideration.[4][5] To make up for the phone interview, Schafer sent in a comic of himself applying for and getting the job at Lucasfilm Games, drawn as a text adventure.[4][5][6]

According to series creator Gilbert, Schafer and Grossman were responsible for about two thirds of the game's dialogue.[7]The Secret of Monkey Island became one of the most acclaimed games of its kind. The same team created the sequel, Monkey Island 2: LeChuck's Revenge.

Schafer worked on an unannounced PlayStation 2 action-adventure game at LucasArts, but it never entered production.[3] Prior to his departure, a number of other developers were leaving LucasArts as the studio shifted away from adventure games. Schafer was approached by his colleagues with the idea of leaving the company to develop PlayStation 2 games on their own; Schafer was initially wary of this believing he felt secure in his position at LucasArts.[9] He left the company in January 2000,[10] to found Double Fine Productions, where he created the platform gamePsychonauts.[3] The game was first released on Xbox in North America on April 19, 2005. It won much critical acclaim, including a Game of the Year award from Eurogamer.

In fall 2009, Schafer completed a new game called Brütal Legend. The game was released on October 13, 2009, on the PlayStation 3 and Xbox 360 consoles.[11] In an April 2009 interview on The Jace Hall Show, Schafer had this to say about Brütal Legend: "For Brütal Legend, I've always seen this overlap between medieval warfare and heavy metal. You see heavy metal singers and they'll have like a brace around their arm and they'll be singing about Orcs. So let's just make a world where that all happens. That all gets put together, the heavy metal, and the rock, and the battling, actually does happen. Let's not flirt around with this; let's just do it."[12]

Schafer announced in July 2010 that EA had canceled the sequel to Brütal Legend.[13] Instead of Brütal Legend 2, Double Fine had a period called "Amnesia Fortnight", where the team came up with prototype games that could be pitched to publishers. From these, four smaller games were made that for the first time in Double Fine's history had project leaders other than Schafer: Costume Quest, Stacking, Iron Brigade and Once upon a Monster.

On February 1, 2012, Schafer returned to the role of director in Double Fine Happy Action Theater, a game concept he devised in order to be able to play a game with his two-year-old daughter that she would be able to enjoy as well.[14]

In February 2012, Schafer launched a crowdfunded project for an unnamed adventure game via Kickstarter.com, using the placeholder title "Double Fine Adventure"; Schafer stated that he had found publishers extremely wary of an adventure in the current video game industry, and decided to turn to crowdfunding to seek player interest. The game and accompanying documentary were projected to cost US$400,000 dollars. Contributions exceeded that amount by more than three times in less than 24 hours, making it the first Kickstarter project to reach a $2 million figure, and the second most successful project on the website at the time.[15][16] When the project ended on March 13, funding reached a level of $3,336,371 in Kickstarter[17] with an additional $110,000 from premium pledges.[18] Ultimately, the project culminated in Broken Age, released in two acts over 2014 and 2015.[19]

Another title from the "Amnesia Fortnight" prototype session was developed into Double Fine's first free-to-play iOS title with funding from Dracogen. The game, titled Middle Manager of Justice, was accidentally released in all territories on September 5, 2012, but was quickly pulled. That build was later branded beta, with the final release coming later in 2012. Like the other four "Amnesia Fortnight" titles, Middle Manager of Justice had a project leader other than Tim Schafer.[20]

A remastered version of Grim Fandango was announced by Double Fine Productions in June 2014, along with a remastered version of Day of the Tentacle, announced in December 2014; Double Fine was able to negotiate a deal with Disney for the remastered versions following the closure of LucasArts in 2013.[21][22][23][24]

Schafer stood in support of Anita Sarkeesian and other game developers that were being harassed by online supporters of the Gamergate controversy that started in August 2014.[25][26] Schafer had hosted the 2015 Game Developer’s Choice Awards on March 5; during the event one of his jokes referenced the #NotYourShield tag that came out of the Gamergate controversy; while Gamergate supporters claimed #NotYourShield was used to demonstrate women and minorities supported their cause in the controversy, Schafer's remarks implied that the tag's use was largely composed of sockpuppets (mirroring the larger media's assessment). Following the event, Gamergate supporters targeted Schafer with criticism, claiming he had been making a joke that mocked minorities.[27][28] Gamergate supporters also criticized Schafer claiming he had mishandled the funds of the Broken Age Kickstarter, following Schafer's decision to expand the scope of the game and seek more funding for that larger scope by offering the game's first half on early access. Since then, these coupled incidents have caused Schafer to continue to be a target of ridicule from some GamerGate supporters.[29][30]

Schafer joined with other industry leaders with crowdfunding experience to help create the crowdfunding platform Fig in August 2015. Schafer currently sits on its advisory board to help curate which projects will be supported, and said that all future Double Fine projects will use Fig for funding.[31]

In an interview at Game Developers Conference in 2003, Schafer stated that he strives for integrating story into the gameplay, setting a creative goal of someday creating a video game without any cutscenes at all.[32] Furthermore, he said he often sets a story in an established world:

"[O]ften, the world is the initial inspiration for the game. One day I was listening to someone tell me their stories of spending the summer in Alaska. They had hung around this one biker bar, with these people with names like Smilin' Rick and Big Phil. And I thought, 'Wow, what a crazy world that is.' It's so apart from everybody's life, and yet it's right there, it's so mundane in a way. And that's where Full Throttle came from."

The press first previewed Psychonauts at the E3 trade show of 2002, where it won the Game Critics Award for Best Original Game.[33]
An hour-long episode of Icons on the G4 Network documented the last week of the production of Psychonauts and explored Tim Schafer's career. (Original airdate: April 28, 2005).[34] At the 2006 Game Developers Choice Awards, Tim Schafer and Erik Wolpaw won the award for Best Writing for Psychonauts. Tim Schafer and Double Fine Executive Producer & COO Caroline Esmurdoc also won the award for Best New Studio. In October 2006, Tim Schafer received a BAFTA video game Best Screenplay award for Psychonauts.[35] In 2012, the Australian Centre for the Moving Image (ACMI) organized the "Game Masters" exhibition, where Tim Schafer was featured as the creator of Grim Fandango, among a few other visionary designers, credited for having "pushed the boundaries of game design and storytelling, introducing new genres, creating our best-loved characters and revolutionising the way we understand and play games"[3] On 2015, he won the Vanguard Award at Bilbao's Fun & Serious Game Festival[36]. Schafer received the Lifetime Achievement Award from the Game Developers Choice Awards in March 2018.[37] He received a BAFTA Fellowship as "a true pioneer of game design, who has pushed the boundaries of the medium through his extraordinary talents" at the British Academy Games Awards in April 2018.[38][39]

^Schafer, Tim; Bush, Josh (March 23, 2014). DFGameClub – Broken Age, Act 1 (Podcast). Twitch. Event occurs at 1:27:30. Archived from the original on March 23, 2014. Retrieved March 23, 2014. Like The Secret of Monkey Island, is it more exciting if I keep it a secret forever? Yeah, my full name is Timothy John Schafer.Cite uses deprecated parameter |deadurl= (help)